Jackson County Senior Services is a nonprofit organization devoted to providing essential services to seniors who live in their own homes within the Jackson County area. Three services are provided for seniors-home nursing. Meals On Wheels, and housekeeping. Data on revenue and expenses for the past year follow: Revenues Variable expenses Contribution margin Fixed expenses: Depreciation Liability insurance Program administrators' salaries General administrative overhead* Total fixed expenses Net operating income (loss) Home Meals On House- keeping Total Nursing Wheels $925,000 $266,000 $406,000 $253,000 468,000 110,000 200,000 158,000 457,000 156,000 206,000 95,000 69,100 42,900 114,300 185,000 53,200 81,200 411,300 121,900 167,700 $ 45,700 $ 34,100 $ 38,300 $(26,700) 8,500 40,100 20,200 7,500 40,000 38,900 20,500 15,200 35,400 50,600 121,700 *Allocated on the basis of program revenues. The head administrator of Jackson County Senior Services, Judith Miyama, considers last year's net operating income of $45,700 to be unsatisfactory, therefore, she is considering the possibility of discontinuing the housekeeping program. The depreciation in housekeeping is for a small van that is used to carry the housekeepers and their equipment from job to job. If the program were discontinued, the van would be donated to a charitable organization. None of the general administrative overhead would be avoided if the housekeeping program were dropped, but the liability insurance and the salary of the program administrator would be avoided. Required: 1-a. What is the financial advantage (disadvantage) of discontinuing the Housekeeping program? 1-b. Should the Housekeeping program be discontinued? 2-a. Prepare a properly formatted segmented income statement. 2-b. Would a segmented income statement format be more useful to management in assessing the long-run financial viability of the various services?
Jackson County Senior Services is a nonprofit organization devoted to providing essential services to seniors who live in their own homes within the Jackson County area. Three services are provided for seniors-home nursing. Meals On Wheels, and housekeeping. Data on revenue and expenses for the past year follow: Revenues Variable expenses Contribution margin Fixed expenses: Depreciation Liability insurance Program administrators' salaries General administrative overhead* Total fixed expenses Net operating income (loss) Home Meals On House- keeping Total Nursing Wheels $925,000 $266,000 $406,000 $253,000 468,000 110,000 200,000 158,000 457,000 156,000 206,000 95,000 69,100 42,900 114,300 185,000 53,200 81,200 411,300 121,900 167,700 $ 45,700 $ 34,100 $ 38,300 $(26,700) 8,500 40,100 20,200 7,500 40,000 38,900 20,500 15,200 35,400 50,600 121,700 *Allocated on the basis of program revenues. The head administrator of Jackson County Senior Services, Judith Miyama, considers last year's net operating income of $45,700 to be unsatisfactory, therefore, she is considering the possibility of discontinuing the housekeeping program. The depreciation in housekeeping is for a small van that is used to carry the housekeepers and their equipment from job to job. If the program were discontinued, the van would be donated to a charitable organization. None of the general administrative overhead would be avoided if the housekeeping program were dropped, but the liability insurance and the salary of the program administrator would be avoided. Required: 1-a. What is the financial advantage (disadvantage) of discontinuing the Housekeeping program? 1-b. Should the Housekeeping program be discontinued? 2-a. Prepare a properly formatted segmented income statement. 2-b. Would a segmented income statement format be more useful to management in assessing the long-run financial viability of the various services?
Chapter15: Choice Of Business Entity—other Considerations
Section: Chapter Questions
Problem 71P
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Transcribed Image Text:Jackson County Senior Services is a nonprofit organization devoted to providing essential services to seniors who live in their own
homes within the Jackson County area. Three services are provided for seniors-home nursing. Meals On Wheels, and
housekeeping. Data on revenue and expenses for the past year follow:
Revenues
Variable expenses
Contribution margin
Fixed expenses:
Depreciation
Liability insurance
Program administrators' salaries.
General administrative overhead*
Total fixed expenses
Net operating income (loss)
Home Meals On House-
Total Nursing Wheels keeping
$925,000 $266,000 $406,000 $ 253,000
468,000 110,000 200,000 158,000
457,000 156,000 206,000
95,000
69,100
42,900
114,300
185,000
8,500
40,100
20,200
7,500
40,000 38,900
20,500
15,200
35,400
50,600
121,700
53,200 81,200
411,300 121,900 167,700
$ 45,700 $ 34,100 $ 38,300 $(26,700)
*Allocated on the basis of program revenues.
The head administrator of Jackson County Senior Services, Judith Miyama, considers last year's net operating income of $45,700
to be unsatisfactory; therefore, she is considering the possibility of discontinuing the housekeeping program.
The depreciation in housekeeping is for a small van that is used to carry the housekeepers and their equipment from job to job. If
the program were discontinued, the van would be donated to a charitable organization. None of the general administrative
overhead would be avoided if the housekeeping program were dropped, but the liability insurance and the salary of the program
administrator would be avoided.
Required:
1-a. What is the financial advantage (disadvantage) of discontinuing the Housekeeping program?
1-b. Should the Housekeeping program be discontinued?
2-a. Prepare a properly formatted segmented income statement.
2-b. Would a segmented income statement format be more useful to management in assessing the long-run financial viability of
the various services?
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